California's Labor and Workforce Development Agency produced and distributed a video news release, narrated by a former reporter, that promotes Governor Schwarzenegger's "plan to modify rules detailing when and how employers are to provide meal and rest breaks." The Los Angeles Times noted, "Unlike an actual news report," the VNR "does not provide views critical of the proposed changes."

Some 18 stations played portions of the VNR, which labor groups and Democratic officials called "propaganda." California's labor undersecretary said the VNR was "clearly labeled as an administration production," and they will produce more, as VNRs are "an effective way to reach residents." A Democratic Assemblyman said, "We all know Gov. Schwarzenegger is good at making movies. It appears that talent has carried over to government work."

Further video news releases produced by the Schwarzenegger administration were later identified. The VNRs tout administration proposals to reduce nursing staff levels in hospitals, to make teachers' pay merit-based, to make tenure more stringent, to lower prescription drug prices, and to end mandatory employee rest breaks. Schwarzenegger's spokesperson called the VNRs "just a press release in video form." But the VNRs push controversial proposals, as opposed to those by the Gray Davis administration, which explained new driver's licenses or celebrated Labor Day. PR Week reports that California "has launched an effort to make VNR production easier for all government departments," by hiring a multimedia communications specialist.

However the legal basis for the use of public funds was at best shaky. "We believe a court would find the 'style, tenor and timing' of the (video news release) to be 'promotional' in nature, thus triggering the requirement it be expressly authorized by statute," ruled the California state legislature's counsel, on a Schwarzenegger administration VNR. The undersecretary of the Labor and Workforce Development Agency, which produced the VNR to support changes in workers' break guarantees, earlier said that "the administration's lawyers concluded the videos were permissible." The Schwarzenegger administration made at least four VNRs without legislative authorization.

Following the opinion of the state legislature's counsel a lawsuit was filed in Sacramento Superior Court by three California unions seeks a ruling banning public funds from being used for the production of video news releases. A California Health and Human Services Agency spokeswoman defended the use of VNRs. "There is no statutory prohibition against the use of public funds to produce video news releases. ... No court has expressly disapproved the expenditure of public funds for VNRs," she said. [1]

In December 2005 a Superior Court judged ruled against Schwarzenegger's VNRs. "The public's ability to participate in the rule-making process was undermined" when the administration of California governor Arnold Schwarzenegger produced video news releases (VNRs) promoting controversial proposals, ruled Sacramento Superior Court judge Lloyd Connelly. "By including comments from the public that are solely supporting" of the proposed regulations, the fake TV news reports created "the misleading impression that the regulations are unopposed by any segments of the public and are not subject to criticism, thereby discouraging any further questioning or investigation of the matter by the public," Connelly wrote in his decision. [2]

Three labor unions had brought a lawsuit against the Schwarzenegger VNRs, which touted since-rejected proposals to remove workers' lunch break guarantees and to delay mandated nurse-to-patient staffing ratios. "The court has once again stopped the governor's extremely abusive practice of using public funds to promote the economic gains of his corporate donors," said a California Nurses Association spokesperson. [3]